The U.S. economy grew faster in early March as the weather improved, governments loosened coronavirus restrictions and massive federal stimulus was injected into the economy, a new survey showed.
Service-oriented businesses such as restaurants, resorts, airlines and hotels posted the steepest increase in business in almost three years, according to economic research firm IHS Markit.
The firm’s “flash” service index climbed to an 80-month high of 60 from 59.8 in February.
Manufacturers, for their part, are also expanding rapidly, though a shortage of key supplies and delays in obtaining them are hold back growth.
The Markit manufacturing gauge edged up to 59 in early March from 58.6.
What happened: Orders are booming as more and more of the U.S. economy reopens. New bookings for manufacturers and service providers jumped to the highest level since the middle of 2014, IHS said.
The downside? “Unprecedented supply chain disruptions pushed” prices for raw materials and other supplies higher again.
The result is rapidly rising inflation, though from very low levels that prevailed during most of the pandemic.
The big picture: The U.S. economy has the wind at its back.
Coronavirus cases have declined sharply, more than a quarter of all Americans have received at least one vaccination shot and Washington just approved another massive fiscal stimulus bill.
The big question is whether prices will decline once the global economy recovers and supply disruptions fade. A prolonged period of higher inflation could throw a big kink in the economy’s longer run health.
What they are saying? “The vaccine roll-out, the reopening of the economy and an additional $1.9 trillion of stimulus all helped lift demand to an extent not seen for over six years, buoying growth of orders for both goods and services to multi-year highs,” said Chris Williamson, chief business economist at IHS Markit.